Analysis: If the US stock market volatility intensifies, it may force the Federal Reserve to cut interest rates

The Reuters columnist pointed out that if concerns about excessive optimism about artificial intelligence continue to simmer, and the recent market volatility turns into more violent volatility, then the financial stability risks caused by the collapse in asset prices may force the Federal Reserve to cut interest rates. Of course, this is not a benchmark scenario. Traditionally, the Fed does not step in to reassure markets unless liquidity dries up and markets become dysfunctional. Although market sentiment and performance have deteriorated significantly, it is still far from a crisis, especially after Friday's rebound. But this time, the Fed may not need to wait until the situation deteriorates to that point before taking action. The reason is that, according to the calculations of many economists, even some policymakers admit that the health of the "real economy" is now more dependent than ever on Wall Street's wealth.